The perfect apple and the Cosmic Crisp
The biggest brand launch since the Pink Lady is changing the nature of the fruit
John Gapper
The boldest launch of a new apple in two decades will soon reach US supermarkets in the form of the Cosmic Crisp. With 12m trees already growing in the state of Washington and a $10m marketing budget, there has been nothing quite like it since the Pink Lady apple emerged from Australia.
“It is enormously crunchy and wipe-your-face juicy,” says Kathryn Grandy, director of marketing for Proprietary Variety Management, the US company in charge of launching the Cosmic Crisp. “Imagine the Possibilities”, is the tagline for the attempt by growers in the biggest apple-producing state in the US to rival Braeburns and Galas.
The new apple’s marketing budget is minuscule compared with the sum Apple spends on iPhones. But the Cosmic Crisp, so named because someone in a focus group compared the light spots on its glossy red skin to the night skies, is the latest effort by fruit farmers to capture the loyalty of consumers.
In these days of farmers’ markets and the rush to make products more authentic and craft-like, branding an apple feels like an odd strategy, even if the Cosmic Crisp is in most regards as natural as the Cox’s Orange Pippin, a British apple dating back to 1830. Both were crossed from other varieties, not genetically engineered.
But apple farmers have discovered that it pays to have their own brands. The Pink Lady, which was first trademarked in Australia in 1992, is based on the Cripps Pink, a variety created 20 years before. Most shoppers still know it as the former and will tolerate its higher price.
Branding gives growers some pricing power against supermarkets, rather than always being at the latter’s mercy. Although shoppers can distinguish varieties of apples (more than with plums or peaches), the common varieties are so readily available from growers around the world that retailers can pick the cheapest supplier.
The usefulness of a brand means that the WA38, a variety developed at Washington State University in 1997 and patented in 2014, is being launched as the Cosmic Crisp. The state’s farmers have replanted orchards from Red Delicious, a venerable apple that has lost popularity. “We have never had an apple of our own,” says Ms Grandy.
Like other new fruits, the WA38 is shielded by patents, and the university gains a royalty from the sale of every tree. But this is not the only way in which it is controlled. It is a managed variety — protected by trademarks as well as patents, with only selected farmers being licensed to grow it according to set standards.
The right to produce the Cosmic Crisp is confined to farmers in Washington until 2024 and may then be extended until 2034, when the patent on the fruit variety will run out. The state hopes that the Cosmic Crisp brand will by then have gained a value that outlasts its patents, as the Pink Lady did.
The cautionary tale is the Honeycrisp, released in 1991 by the University of Minnesota as an open variety that anyone could grow if they paid the royalty. The Honeycrisp is among the most popular US apples, and one of the varieties crossed to make the Cosmic Crisp, but its US patent protection expired in 2008 and it was not trademarked.
That has made universities and the farmers around them eager to manage and brand their most promising new varieties. The University of Minnesota has produced the SweeTango and Cornell University the SnapDragon. The brands now jostling for recognition include Pazazz, Rave, and the Midwest Apple Improvement Association’s Ludacrisp.
This competition is one reason for the size and speed of the Cosmic Crisp launch. Washington wants to use its farming capacity and marketing clout to develop the brand as fast as possible. This could both boost revenues while the variety is under patent and overpower the emerging rivals.
There is a danger that apples become so efficiently cultivated that they lose the fruit’s essence. The Cosmic Crisp is the ultimate expression of today’s approach, with its consistent appearance, balance of sweetness and tartness, and the crispness and juiciness characteristic of the modern apple.
The Cosmic Crisp also suits farmers. Its flesh does not bruise or turn brown easily and it can be stored for up to a year after harvesting so that it remains on supermarket shelves. The trees are grown from dwarfing rootstock that lets farmers fit more than 1,000 to an acre, lined up neatly in rows. Today’s apple orchards bear little resemblance to the image in people’s minds.
Farmers can hardly be blamed for responding to the market in this way — they have limited choice, given consumer preferences and the buying strength of supermarkets. The Cosmic Crisp is perfectly adapted to what retailers and shoppers want, wrapped in a trademark to make it profitable.
In the future, the consumer could tire of what has been made for him and her — the unnerving consistency of fruits that always taste the same, with a crispness that takes months to fade.
They may miss their old quests for apples in season, and the unpredictable pleasures of the first bite. Until then, here is the Cosmic Crisp.
THE PERFECT APPLE AND THE COSMIC CRISP / THE FINANCIAL TIMES OP EDITORIAL
UNCERTAINTY, UNCERTAINTY, UNCERTAINTY / SEEKING ALPHA
Uncertainty, Uncertainly, Uncertainty
- On the bright side, equities have managed to surge back near all-time highs, and I'm happy to give you some granular color on that.
- I'll bracket that with a 30,000-foot view on the global outlook and a 10,000-foot view (if you will) from the executive suite stateside.
Secular stagnation has now become our baseline. Growth is slowing in almost all major economies, in some cases from already low levels. Trade deals are only likely to avoid further tariff increases, at least for now, while keeping the tariffs of the last two years in place. Political uncertainty in the US is likely to increase ahead of the elections next year. We see increasing evidence that monetary policy has become ineffective, accumulating negative side effects. Fiscal policy is not coming to the rescue, and in any case, very few major economies could afford it. Structural reforms remain a theoretical and unpopular concept for most governments. Having to fight increasing populism, mainstream governments have often become reluctant to push for much needed reforms. Tight labor markets, in any case, suggest capacity constraints. Increasing wages without inflation also point to risks for profits.
This multi-day rebalancing out of front and into the 2nd contract by Wednesday—on top of Dealers puking a meaningful amount of the VIX upside / VIX futures exposure which they had to buy in order to hedge the “Oct Call Wing” buyer flow that they were short to clients and each other—is the real “how and why” of this rally and the stickiness of Stocks holding “higher,” despite the constant complaints from those who believe we should be lower for “fundamental” reasons.
As I referenced last week with the VIX “knee-capping” we’d been calling-for into expiry (which then drove a massive steepening of the VIX futures curve, as longer-dated stays “bid” against VIX ETN rebalancers SMASHING front-month thx to the contract roll), the trick is that this ETN rebalancing impact on “lower VIX into expiry / settlement” then marks a “local low” which tends to see a 1) higher VIX- and 2) VIX curve flattening- (or even inversion) impulse thereafter.

Companies spend less cash when policy uncertainty is high. Historically, growth in aggregate S&P 500 cash spending has been weaker during periods of high policy uncertainty. The combination of an ongoing trade conflict and next year’s US presidential election will likely result in lingering uncertainty.
We estimate cash spending will fall by 6% during 2019 before rising by a modest 2% during 2020. S&P 500 cash spending rose by 5% during 1Q, but plunged by 13% yoy during 2Q. During 2019, the decline in spending will be driven by a 20% drop in cash M&A and a 15% fall in buybacks. In 2020, we expect modest growth in capex (+3%), R&D (+6%), dividends (+5%), and cash M&A (+6%) will be partially offset by a 5% decline in share repurchases.


Ongoing bearishness about the prospect of a trade war resolution: note 43% of FMS investors think the US-China trade war is the new normal vs. 36% who think we will see a resolution before the 2020 US Presidential election.
Aside from the end of the trade war (#1 FMS “tail risk”) FMS investors think a German fiscal stimulus package, a 50bp cut by the Fed or a Chinese infrastructure package would be the most bullish for risk assets over the next 6 months.
CHINA´S PROPERTY BOND BOOM CLASHES WITH HOUSING MARKET REALITIES / THE WALL STREET JOURNAL
China’s Property Bond Boom Clashes With Housing Market Realities
Issuance of bonds by real-estate developers has surged, but a weakening property market make them poor bets
By Mike Bird
A residential construction site in Hong Kong. Property developers in Hong Kong and mainland China make up almost half of Asia’s high-yield-bond market. Photo: Paul Yeung/Bloomberg News
China’s property developers have used falling U.S. interest rates this year to issue swaths of dollar debt. Yet the state of the country’s housing market—now past its prime—suggests investors would do well to steer clear.
Developers in Hong Kong and mainland China account for 41% of the net issuance in Asian dollar-denominated bonds included in the ICE Bank of America Merrill Lynch Asian Dollar index this year, rising to 67% in the high-yield segment, where they now make up almost half of the total market.
Even investors who haven’t opted to take direct exposure to the sector may now find it creeping into their portfolios: 14.1% of the same broad Asian Dollar Index is now made up of Chinese and Hong Kong property bonds, up from 11.2% at the end of 2018.
The two largest contributions come from China Evergrande Group,which alone has issued this year around $15 billion in bonds rated by Moody’s Investors Service, and Sunac China Holdings Ltd., which has issued around $6 billion. Sunac was given the lowest relative rating against 14 of its peers based on its financial results during the first half of 2019 by bond researchers at CreditSights.
Average yields on high-yield Chinese bonds broadly have fallen considerably this year, to around 8.4% from a high of 11.7% as recently as November 2018, according to the ICE Bank of America Merrill Lynch Asian Dollar index. Even Kaisa Group Holdings Ltd., which defaulted on dollar bonds in 2015, saw strong demand for $400 million in issuance last week, at a yield of 12.25%.
Developers have levered up in other ways as well this year: presales of housing, which act as a shadow funding mechanism for property companies, have boomed even as completions of housing have been lackluster.
This is difficult to square with what is actually happening in the housing market. Data released this week showed that house prices in the 70 cities monitored by China’s National Bureau of Statistics rose by 8.6% in the 12 months to September, the slowest pace in a little over a year. Of those 70 cities, 12 reported price declines, the highest number since February 2018.
Those are hardly figures to send investors hiding under their mattresses, but it is difficult to see how the sector would return to more frenetic activity.
The central government’s reticence to pursue a broader stimulus this year has been based in no small part on a reluctance to allow credit to flood the housing market, as it did after the wave of 2016 stimulus, when household debt growth doubled.
Several cities have undertaken more restrictive real estate policies in recent months, including limits on nonresident purchases, price caps and preventing developers from converting commercial to residential land.
The case for Chinese property debt at their current prices is feeble enough, even before considering that foreign investors are at the bottom of the pile as far as the Chinese government’s priorities go.
If Beijing is ever faced with the choice of satisfying local buyers waiting for their houses, Chinese banks, or overseas bondholders, it won’t be a difficult choice to make.
THE ENCHANTMENT OF MUTUALLY ASSURED DESTRUCTION / GEOPOLITICAL FUTURES
The Enchantment of Mutually Assured Destruction
By George Friedman
|
Bienvenida
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
Pensamos que solo comprendiendo cabalmente el presente, es que podemos proyectarnos acertadamente hacia el futuro.
Gonzalo Raffo de Lavalle
Friedrich Nietzsche
Quien conoce su ignorancia revela la mas profunda sabiduría. Quien ignora su ignorancia vive en la mas profunda ilusión.
Lao Tse
“There are decades when nothing happens and there are weeks when decades happen.”
Vladimir Ilyich Lenin
You only find out who is swimming naked when the tide goes out.
Warren Buffett
No soy alguien que sabe, sino alguien que busca.
FOZ
Only Gold is money. Everything else is debt.
J.P. Morgan
Las grandes almas tienen voluntades; las débiles tan solo deseos.
Proverbio Chino
Quien no lo ha dado todo no ha dado nada.
Helenio Herrera
History repeats itself, first as tragedy, second as farce.
Karl Marx
If you know the other and know yourself, you need not fear the result of a hundred battles.
Sun Tzu
Paulo Coelho

Archivo del blog
-
►
2020
(2008)
- ► septiembre (145)
-
▼
2019
(2103)
- ► septiembre (187)
-
►
2018
(1928)
- ► septiembre (173)
-
►
2017
(1947)
- ► septiembre (160)
-
►
2016
(2576)
- ► septiembre (182)